Russia’s Rosneft close to sealing deal for TNK-BP

The Russian oil company Rosneft is close to deal for TNK-BP in what would be the industry’s biggest acquisition since Exxon bought Mobil in 1999. Roseneft already has a preliminary agreement with the billionaires who control half the venture and has submitted a bid to acquire the remaining 50 percent from BP, Bloomberg News reported.

The long-sought deal, worth an estimated $56 billion, would allow BP to maintain a foothold in Russia but get it out of the troublesome joint venture, which has been fraught with internal squabbles since it was created in 2003.

An agreement would also give Russian President Vladimir Putin tighter control over the country’s energy assets. By adding TNK-BP’s oil and gas reserves to its own, Rosneft’s daily production would be about 4.5 million barrels a day, rivaling Exxon Mobil’s, Bloomberg said.

BP has been trying to shake loose of the venture since May, when its relationship with its billionaire partners once again soured. The partnership has been a financial boon for BP, generating some $19 billion in dividends and accounting for a quarter of its global production, but it’s been an operational nightmare. Selling its stake in the venture coincides with BP’s strategy of raising cash to pay for costs related to 2010’s Deepwater Horizon disaster in the Gulf of Mexico.

The sale to Rosneft requires approval of BP’s board, and a final deal may not be completed for several days, Bloomberg reported.

A sale would bring to an end former chief executive John Browne’s grand vision for BP, which he wanted to transform into a global leader in oil production that rivaled Exxon Mobil. BP was determined to stay in Russia long after most other western oil companies pulled out, luring by the huge potential reserves. The 50-50 nature of TNK-BP, though, meant that neither investment group was really in charge, creating perpetual battles over strategy. In the end, the venture became another symbol of BP’s unrealized aspirations.